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Szn 4, Ep 6: The ‘Bad Times Are Already Here,’ With Acquirers Funds’ Tobias Carlisle

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Tobias Carlisle of Acquirers Funds rejoins the podcast to discuss the stock market’s latest dramatic reversal, this time over Russia’s invasion of Ukraine, and why investors may be a bit too bullish at present…

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Nathaniel E. Baker
Tobias Carlisle from the acquirers multiple return visitor today to the contrarian investor podcast. Thank you so much for returning.

Tobias Carlisle
Yeah, thanks for having me

Nathaniel E. Baker
Yeah, it’s been, it’s been exactly actually two years almost to the day, when you were on last. And you raise a caution at a time over COVID. And not everybody was at that time. And you turned out to be right in the short term, but maybe not in the medium term, because we had a huge rally starting in late March of 2020. That has basically persisted until today. And now this week, that just concluded, we had another bout of precipitous selling, that had many people calling for Armageddon, among other things that has now reverse. And so I’m curious about your thoughts on all this. We don’t have a script here. I know there’s one stock you want to talk about a little later. But I think we can kind of this will be our way of back ending into it. So yeah, what do you think of this whole reaction today? And yesterday, the bullish reaction by the markets,

Tobias Carlisle
it’s a bit gross, that’s it I was saying before we get on wasn’t that I don’t really like seeing the stock market rallying, when there are bombs being dropped anywhere it seems to be. It’s it is one of those funny things so that I have noticed about the market in the kind of 20 years or so that I’ve been in it is that it’s often a lead up to something that it’s like the uncertainty is worse for the markets than this, like the worst possible outcome is better than uncertainty in a sort of really strange way for the markets they prefer. You know, there’s a range of outcomes before we go to war, right? One of them is not going to war, but in that intervening period in the lead up, you’ve got all this uncertainty, do we go or do we not go? And then the worst possible outcome occurs, which is going to war and the markets rally on that? It’s a really odd thing. And I’ve seen it over and over again, you know, lots of different individual names and indexes. It’s one of those things like if you just, you know, you’ve got to buy the uncertainty, I guess. And then what are they saying, buy the rumor, sell the news?

Nathaniel E. Baker
Exactly. But that comes with risk then. Right. And in this case, if we’re talking about a war between nuclear armed superpowers, the risk is potentially quite literally the end of the world. And at that point, nothing will matter.

Tobias Carlisle
What do you buy? What do you buy in that scenario? Nothing. It’s nothing, it doesn’t

Nathaniel E. Baker
matter. Yeah. So and, you know, I talked about, but I’ve talked about this on my daily podcast, for those of you who are listening, and those of you who weren’t considered this a shameless plug, but it seems that the investors have kind of made their peace with the fact that this Russia, Ukraine conflict is going to be short, and is going to be resolved quickly and without involving any other countries. And so that appears to be the calculus. And also what’s helped, I guess, are the sanctions that the Biden administration and others have announced, that have maybe not been quite as draconian as people were expecting. So maybe that’s the certainty that people were looking for.

Tobias Carlisle
Yeah, every single war that has ever started, everybody thought that I’ll be home by Christmas, you know, that’s always the line, the boys will be home by Christmas, it’ll be okay. And sometimes that happens, but most of the time, they drag on even, you know, relatively minor conflicts from our perspective, being, you know, the people who aren’t involved in the war, don’t drag on for that long, but, you know, we’ve been stuck in lots of different countries for a very long time and World Wars went on. You know, they certainly went past every single Christmas that everybody anticipated being home by so I the risk, I guess, is that conflict, domestic conflict between two countries in Europe where one country invades the other like that that’s that’s happened a few times before and it pulls in a few other nations and then everybody’s at war. So that would be a disastrous outcome. Indeed, that happens. And you know, good for defense manufacturers for if you want to really sick point of view on it, which and I own a few unfortunately, but you know, I only because they were cheap at one point, and maybe now’s a good time to sell them. I’m not necessarily advocating for them, but we can talk about them a little bit later. I just want to say that last time I was on, so two years ago, but it was, so it must have been February 25, 2020, which is just before the whole thing

Nathaniel E. Baker
I think that’s exactly what’s the date?

Tobias Carlisle
I think my view at the time was that there would be this sort of rolling, it would impact earnings on a rolling basis in it right. And I think that that is exactly what ended up happening. The problem is, and this is what makes investing so hard is that the multiple didn’t care, the market got that huge injection of, of money from the Fed, and also the fiscal stimulus. And it was just like injecting cocaine or Ritalin into the system, and the market went absolutely bananas for a few years there. And it’s probably I mean, now, or it’s probably been coming back to Earth for about a year. Because the the main beneficiaries of that all of that growth is stuff. And that’s had a disastrous 12 months, like probably from February 12 last year. And it’s been a bit of time for the stuff that I like, which is the the cheaper, real businesses that kind of plod along a little bit. So it just sort of shows that macro prognostication is really difficult to do sort of halfway right. And just completely wrong.

Nathaniel E. Baker
Yeah, you’re absolutely right about that. Yeah. And, you know, but to your point value was out of favor two years ago, it was even out of favor one year ago. And it’s come roaring back this past year these, especially these past six months. So value investing is not dead, and will probably not live that again, until the next big growth cycle. Do you think that we’re that the NASDAQ skirted was very briefly in a bear market? It’s been in a correction for a while? Do you think we’re in a bear market? Or is this just a correction?

Tobias Carlisle
Impossible to say? And I wouldn’t, it wouldn’t impact anything that I do professionally, but like just speculating that what I think so that the there are two types of crashes that you see in the market, but I would say much, much 2020 was like a flash crash was the fastest descent, the biggest ascent, I think, exceeded 1987, in terms of its, you know, how quickly it happened and how far it went down, and then recovered and went to new highs very shortly thereafter. So I regard that as a flash crash, the bear markets, which are the things that are really tough, what characterizes a bear market, is this constant bounce to a lower high, and then falling to a lower low. And it happens, like you can go back and look at 2007 to 2000 happened 18 times or something before it bottomed. And it’s that, you know, it’s the 1516 17/17 time that it happens that finally the winner of last person gives up and thinks this will never rally again, that’s the point when it actually happened. So you just have to be patient and find some way to sort of ignore it all. But if, you know, it certainly seems to me that that’s what we’re going through now. And it probably all of the indicia of that you would expect to see at the very top of a market would present all that crazy speculation, in the growth is stuff like NF T’s and other things like that. But there’s, you know, basically Ponzi schemes and other things like, you know, even Bitcoin, I know that people aren’t gonna like that. But it’s I still don’t think that it’s got any particular utility beyond, you know, maybe money laundering and getting money out of regimes where it’s where they’re hostile to their own citizens, maybe it’s good from that perspective. I think that the, the speculation was present, that then impact that the bear market probably started in those really growth stocks, and it started February 12, you can have a look at an ark as the sort of emblem of that entire complex of highly growth, the tech stocks that don’t ever actually make any money and issue a lot of stock to keep on sort of going and so that crash has been going on for more than a year now. And hadn’t impacted the broader index because they seem to be held up by like a handful of stocks, and they’re all pretty good, pretty reasonably valued. You know, they’re expensive, but they’re not wildly expensive. And I’d say that’s like, you know, Microsoft, Google, Facebook Fang deal, or fat man or whatever. The

Nathaniel E. Baker
Facebook’s an interesting scenario, though, that maybe I mean, I want to group those with the others. But yeah, go on.

Tobias Carlisle
Well, I think Facebook’s cheap, we can come back to that. Okay. Okay. Great. That’s good. That, and a few of them are to feel sheepish, but I think that kind of held up the index. And so the index is really only started falling over since the start of this year. And that seems to be what happens. It’s localized, and then it bleeds over and it becomes systemic. And then it’s sort of it’s not really even, you know, people aren’t selling for valuation reasons they’re selling because that they’re getting margin calls or they’re panicking or they’re rebalancing out of other stuff. And it’s just it becomes systemic at some point. And everybody’s just trying to get ahead for the exits, which of course everybody can’t do it the same time because you need buyers on the other side. So I think we could very well be in the middle of that process or in the very early stages of it, I tend to be the crushes that I’ve sort of looked at on on an average basis that what happens is the market tops up, spent about a year kind of drifting sideways. And then there’s about six months to 12 months of, of heavy sewing and the carnage and that’s the part where that’s the the bear market that registered, so 2007 to 2009. That started in June 2007. But the real action for that crash was q3 2008, q4, 2008, q1 2009. That was where every quarter the market was off 12 15% or something like that. And that was probably underselling what was happening? Because there were bigger moves in intra quarter than that. So that that would be I think we probably are in one now. And it’s probably going to play out the way that the other ones have played it. I just don’t know what stage we’re in. I don’t know if we’re 12 months in or, or started.

Nathaniel E. Baker
Interesting. So when did to our que se peaked in February 2021? So exactly,

Tobias Carlisle
1220 21 really? Okay.

Nathaniel E. Baker
And uh huh.

Tobias Carlisle
156 bucks. It’s more than 50% since then. Right.

Nathaniel E. Baker
Okay. So you said that was? Right, right. But I mean, in fairness, though, not all of those companies are need to raise money. They aren’t all of the.com variety that some of these are real businesses, right? Like you think of a Roblox you think of a I mean, even zoom, I guess, I don’t know, if that quite qualifies, you know, we’re on Zoom. Now,

Tobias Carlisle
yeah, at some stage, like zoom becomes an interesting value that you’re right, you’re absolutely like, that’s I’m being I’m paying with a very broad brush there. But they’re the I would say that the majority are characterized by the fact that they’re currently losing money. And I’m not saying that in any individual instance, that’s not a sensible thing to do, if you’re familiar of these companies, that their, their, their approach is to try and dominate the niche that they’re in and spend as much money in the land and expand, spend as much money as they possibly can lose as much money as they possibly can make sure nobody else can compete. And then once there are no competitors there, and they’re firmly established, and unable to be removed from everybody else’s business systems, then they put up the price, and then they become very good businesses. And I think that’s what most folks who are in these things look at, look at the size of the opportunity, if we can get there. And in some instances, that will turn out to be absolutely right. And there are guys in there who are definitely out there doing her in those things. Having said that, there are a lot in it. And the thesis is predicated on exactly that, you know, they will at some stage be the next Amazon. Not everything is the next Amazon and even Amazon had those 90% draw downs on the way to becoming Amazon.

Nathaniel E. Baker
Yeah. But one thing though, about about this cycle, is that interest rates, and we can bring these into the conversation. Now they, you know, if you go back to in 2007, at that point, the Fed had already raised I don’t know how many times a lot. I think they’re on a little, you know, bernacchi Fed I think Greenspan started it and like for every quarter, they were, they’re raising a quarter basis point for years. And so we had higher interest rates that had started to take effect. And were well washing their way through the system, when the real bear market started. And same in 2000. You know, actually, we had a huge bull market that preceded it was we had higher interest rates throughout the late 90s. But not not entirely, but most of it. So that’s the one thing where so far all we’ve gotten is noise from the Fed. And I know they meet in a couple of weeks, march 16, I think. And they basically Well, it was at one point was going to be 75 basis points or a full percent announced 25 or 50. But what do you make of the argument that the interest rates haven’t really taken haven’t been raised yet and haven’t taken hold in the economy yet. And so there, there’s still a lot of room to run and things like growth stocks could recover?

Tobias Carlisle
Yeah, entirely possible. But I think that the problem for the Fed is that they are way behind the curve this time, because inflation is running so hot right now, so that they’re really going to have to decide whether they’re going to look after the little people or were they going to keep on looking after asset owners. You know, based on the track record, I guess they prefer asset owners over Yeah, over the working class. But I think that seven and a half percent interest inflation with like the 10 years at 2% See chewing at five and a half percent. You do that for a few years, it starts getting really nasty on on savers and other has been nasty and so so I guess we know which way the Feds gonna go. But I think that if there was some decency there, they might, you know, they might start hiking at some point to try and cool it off a little bit or at least just take off the you know, they need to be buying the mortgage just where the property market is just white hot at the moment.

Nathaniel E. Baker
Probably not. Yeah, so yeah, that’s That’s true. but still cyclically, like we still aren’t in a position where the money has to go somewhere. And the fixed income assets aren’t I mean, they’ve you know, the yield is now a little more interesting than it was at the start of the year a lot more interesting. But it’s still not much, it’s still not enough to keep up with inflation. So where does one put one’s money?

Tobias Carlisle
Yeah, the Fed loves to take people at the risk of push people way out on into riskier assets than they should really otherwise be in, you know, I’m gonna keep I’m gonna it’s gonna sound like I’m talking my book and I am talking about that’s fine. Yeah, the only asset class, I think that offers any value has as value stocks, because they are the only thing that didn’t really participate in the bubble that they’re at about their long run men. So in a world where interest rates are at, you know, the 10 years at 2%, for long run men in value stocks means that they’re probably good relative value, or the only source of relative value. And I think that given that the growth stuff is so expected, you know, is, is as expensive as ever been even having pulled back still, relative to the value stuff, probably the better value is in value. And I think that there’s been a recognition of that in the market already. I think it really started in September 2020 would be the bottom, and then it rallied, and then it sort of fell back again, probably to, you know, maybe maybe September last year. And it’s been rallying again, at some point, the value in, in the heavier industries. And I think energy, you know, we spend a lot of time talking about the Fed, but energy to energy prices have historically been another way of popping bubbles of $100 oil makes it difficult to run an economy. You know, that’s the that may be that whatever the what the Fed does is irrelevant. It’s $100 oil, it pops the bubble. And perhaps that’s what’s happening. And so a crisis in Ukraine and Russia, which is a an exporter of, of energy, that’s, you know, great for energy producers, but probably not good for the rest of us.

Nathaniel E. Baker
So does one buy Dubai or big oil companies here?

Tobias Carlisle
I think that energy has been historically cheap, probably the best signal to buy energy was when oil went negative. Yeah, I think that was the bottom for around. But I think that you know that with with, you can look at the the the white of energy in the s&p 500 relative to where it has been in the past. It’s just minuscule. And so I think that we’ve been under investing in the sector. And typically what follows underinvestment in a sector is supernormal profits in that sector, which is what attracts capital back into it. So I think we’re probably at the very beginning of that cycle. And certainly when I run my screens, they fill up with energy. And it’s every sort of produces, you know, midstream, everything just sort of looks still looks pretty cheap to me in that sector. Who really knows I could be there could be a lot of volatility was probably good years to go before. Before that’s before that idea is played out.

Nathaniel E. Baker
Interesting. Okay. All right. So keep an eye on energy, buy the dips in energy, perhaps. Now talk to me about Lockheed Martin.

Tobias Carlisle
Yeah, lucky, it was something that I put on last year, simply because it this is a tent, it was too cheap for what it is. And they’ve they’ve been pretty good capital allocators as they’ve gone along the risk with the risk with defense contractors is always when a new administration comes in. There’s some concern they won’t spend, like the last administration does. Happily, every single administration that has ever come in has always spent more than the one that came in before. So I think that that that risk is low, and it looks like you know, we’ve got a new we’ve got, we’ve had people panicking about code for two years. And just as we sort of seem to be emerging from that we’re gonna start a conflict somewhere else in the world. And so I think that that’ll be the thing to panic about for a while. So that looks like Lockheed Martin is a well managed, absolutely essential contractor builds just about everything that the US needs to defend itself. And so I don’t think it’s going away anytime soon. Having said that, I have been in it for a little while. And I I do think that it was getting I thought it was getting closer to the top of its range of what I thought was reasonable. So I have to think about that a little bit over the next month or so. And I I’m not sure when this podcast to come out, but it’s entirely possible. I’ve sort of exited Lockheed Martin, but at stage will continue to hold on I just don’t know at this point, because I haven’t looked at it as closely over the last few weeks. And the other defense contractors you have an eye on now not so it’s a trend to be to kind of macro about it. It’s really on a case by case basis,

Nathaniel E. Baker
I think Okay. Okay. Well, let’s let’s talk about Facebook.

Tobias Carlisle
So Facebook has been an interest What’s the there’s clearly a change in the business. The difficulty with with tech or any of these kinds of ideas like if Facebook, if the blue app becomes like MySpace, then the bottom is nowhere in sight for Facebook. It’s Hang on, let

Nathaniel E. Baker
me challenge you on that just a second. Because Facebook is not just Facebook, it’s also Instagram, which young people still use. I can confirm I’ve talked to them. What’s your account? Well, you know, 25 or under.

Tobias Carlisle
So, so hit but here’s what happened. Here’s what’s happened, right? It looks like real. Tik Tok has overtaken Facebook as the preferred sort of social network, and it’s not an tic TOCs not so much social as it is viral. It just, you don’t you’re not necessarily looking what your friends are doing on it, you’re looking at what whoever, the whoever, whoever has the most viral image of the day. And so it’s a slightly different, it’s not social work. Facebook has typically been social. And it has now exceeded Instagram in terms of downloads, it’s sort of our generation

Nathaniel E. Baker
Yeah, that’s right

Tobias Carlisle
And then follow us, you know, so I got an Instagram originally, because my friends were having kids, and I want to see photos of their kids. Nobody posted Instagram anymore. Nobody goes on Facebook anymore. Having said that, the data doesn’t seem to bear that out. When you look at the data. Somehow, Facebook’s daily average is still pretty robust and growing. So it’s probably going to be okay on that front. But they’ve got other problems. You know, most people access it through the Apple Store. Apple’s getting a cut of everything Facebook makes through that through that app, you know, there’s lots of other little problems that they have to face, it’s probably not as good a business as it was in the past. Having said that, it’s still a very, very good business. It’s, you know, they don’t have a lot in terms of assets. And they make a lot of money on not much. So their ability to grow and to shrink and is a got a lot of wiggle room and a lot of cash. Zuck is clearly very, very smart and pretty good at this game. He’s been good at sort of transitioning across the transition from Facebook to Instagram. Who knows about the metaverse. I don’t know whether everybody wants to go back into a walled garden or not, I doubt it. But maybe that is the future. And that’s his visionary tech genius. The way that I look at it quantitatively at the moment, it’s too cheap. Or that stock price is indicating a very large diminution in the performance of the fundamentals of that business. So when I see things like that, I think it’s probably I don’t know which one happens. But the way that I run my portfolio, I’m prepared to take little bits like that, where I think that there’s clearly a disconnect between the stock price and the fundamentals. I’m not saying necessarily I’m going to buy it either. I just I don’t know. It’s still it’s still up in the air haven’t haven’t made that decision yet, either. But it’s possible. It’s sort of it’s, it looks like it’s something that might make its way into the portfolio at some point. So I think it’s I think it’s interesting. It’s certainly contentious. And I know that lots of people who’ve got strong feelings either way, in relation to Facebook, but it certainly seems to me that it’s either massively too cheap for the prices, or it really is going to be deteriorating a lot near Philly near near future.

Nathaniel E. Baker
Alright, yeah, I just looked here, Facebook closed at $210.48. Do you have any kind of price that you’re that you where it might become exciting to you? I think it dipped below 200 briefly this week at one point? Yeah. Yeah,

Tobias Carlisle
I think I still think it’s interesting here. It’s, it’s, it’s interesting here, it’s just you know, that the challenge for me when I’m forming a portfolios is that when it comes time to buy that, there may be other opportunities that that get cheaper in the interim. So it’s not so much where Facebook is, it’s where Facebook is, relative to a few other things. And there’s a few things that are just sort of Facebook is on the edge of, of the portfolio right now. So if you’ve got below $200, it was it was exceptionally interesting. towards $300. It’s, it’s less interesting, but I think at $200, it’s like it’s half price where it should be if if it can sustain what it’s been doing. And it probably indicates to the fundamentals can deteriorate by half. And it’s fair value. So it’s got that that’s sort of the way I’m thinking about it.

Nathaniel E. Baker
Yeah, yeah, don’t forget also that Facebook is sitting on a ton of cash. And I don’t think they really have any debt so they could buy just about anybody other than, you know, some huge company and completely transform the business if they really wanted to,

Tobias Carlisle
and they quite responsive. So the market when the market when they trade down as cheaply as this, the market is telling you to liquidate the markets telling you that you’re too big for the opportunity that in pursuing and if you’re a responsive management, you buy back stock, which is a way of liquidating business Since which is what they have been doing. So when when that happens, that means that you know, management’s taking advantage of the fact that they’re undervalued, that’s a pretty good sign. If management thinks that they’re undervalued that, you know, that investors should think about that, too.

Nathaniel E. Baker
Yeah, let me throw something else out there for you. If what if I know that actually, what if what if Facebook were to institute a dividend?

Tobias Carlisle
I prefer buybacks because they’re much more tax efficient. And I think that the dividend, I mean, they need to they need to do something about the differential taxation of dividends and buybacks or the fact that buybacks, buybacks, don’t, you know, dividends are taxed at the company owns the money, they pay tax at the company level, then they divide it up that money and you pay tax again, as a preceding shareholder, a buyback? If you don’t participate in the buyback, then it doesn’t impact you at all other than the fact that you own more of the company now.

Nathaniel E. Baker
Right. Okay. So yeah, so you’re more of the Buffett school where they I know Buffett and Munger don’t believe in dividends, they prefer to see it invested back.

Tobias Carlisle
I think their argument is that they’re better that you’re invested with them, because it’s an investment company. And so when they take the money, what they’re going to do is reinvest. And so, you know, but they do, they do, do a buyback buybacks are one of those things that people again, people have pretty strong feelings about buybacks each way, because so many buybacks are conducted at a premium to what the company is worth, because management’s trying to mop up options, or they’re trying to boost the stock price higher. And when they do that, that that destroys value for the shareholders who remain. So you want an undervalued company conducting a buyback and Facebook qualifies on that basis. So did so did Berkshire Hathaway when it was conducting its buyback?

Nathaniel E. Baker
Sure, sure. All right. Let’s switch gears really quick. I want to raise a tweet that you just sent two hours ago at the time of this recording, NF T’s are over dead as disco. This implies they were once alive.

Tobias Carlisle
Well, there’s been a lot of speculation in Ft. It’s like fits that. Let’s establish that that’s the case right with stipulate that’s the case, people have bought lots of NF T’s whether they have any, you know, like like all of these things like anything on the blockchain, the blockchain probably does have some utility. And NFT is probably do have some utility. But I don’t think that the JPEG attached to the NFT, you know, the non fungible token, which is which means that non fungible means you can’t exchange one for the other, it’s unique, that’s the whole point of it, it’s a unique identifier, that probably has a lot of utility, like a ticket could be an NFT, that that’s a great use of an NFT. But having a picture that somebody sells with the idea that they’re going to then sell it at a higher price in the future. That that’s sort of it’s speculation, not that there’s anything wrong with that you’re, you’re entirely aware to speculate. But the people who create these things, you know, I can create 10,000 What are they call them procedurally generated eight bit FFTs. At, you know, I can probably find an app on the web on the web that will do that for me. And then I can turn around and take some of my Aetherium and sell myself an NFT that I own, at whatever price, I want $2 million for one of those NF T’s and I can turn around and sell you one for $200,000, which looks ostensibly like a 90% discount, except it’s me who saw myself sort of just a wash trade, as they call it in the stock market. And now I’ve made $200,000. And I think that there’s a lot of that going on in the NFT is it’s kind of like it’s a it’s a Ponzi scheme, or it’s, you know, it’s some other kind of scam. I think that that the way that scams work, typically is that you need a whole lot of new suckers coming in the front end. And so the tweet that I sent out, was just what does Google see that the interest in in NFT is that I can I’ve been watching it for a little while fully expecting it to turn down at some point. And that’s turned down below where it was in November 2021, which was one of them are getting a lot of attention. And so I think that that front end, flow of greater falls, when that goes away, NF T’s will, will go away and they’ll fall back to virtually nothing. So if you’re in the NF T’s, you should be getting out of them as fast as you can, I

Nathaniel E. Baker
think, yeah, I I’m not gonna, I don’t want to dispute any of that, because those are kind of my views on NF T’s as well. But just to play devil’s advocate here a tiny bit. It looks like this dissent started. If you look at this searches, I wonder if that coincides with broader other macro things and if this could be just because there’s been other things that are going on,

Tobias Carlisle
but that’s what it all of these sort of the speculative like that moving faced in speculation that has moved from Tesla into crypto into you remember when the bankrupt companies anything with a que after it’s massively and then it went into GameStop. And that went AMC into NF T’s that Moveable Feast of speculation requires like that. It requires action. You need action in that for the action junkies to be kind of interested in for the speculators and the gamblers to come in and when the action goes away, they go away to I mean, that’s that’s what that’s what drives it in, in the first instance. That’s what makes it so interesting. At first, it’s once that’s gone, it’s hard to get that back. And it’s like, MySpace was a big thing once. Nobody, nobody knows anymore. Yeah. Yeah, no, Tom did a good job. He shipped it for 700 million can’t hit. Yeah,

Nathaniel E. Baker
no, no, no, yeah, he cashed out. Right. But he could have been so much more richer. He could have been a billionaire.

Tobias Carlisle
Yeah. But he’s got that Instagram channel where he just goes around taking photos of beautiful places on the earth. He’s got photos, he doesn’t have to testify to Congress. He’s one. That’s true. That’s true.

Nathaniel E. Baker
Yeah. He doesn’t have to lie to Congress. I mean, yeah. And then when the UK called The UK regulators calm, just not show up. Like,

Tobias Carlisle
what at night, like, what would you like, there’s probably not enough money in the world. For me. There’s not enough money in the world for me to do that job. I don’t want that job on on Tom’s job.

Nathaniel E. Baker
I would do it for a little bit and then cash out. Or allow myself,

Tobias Carlisle
you know, that kind of fame?

Nathaniel E. Baker
No, you’re right. I know. You’re right. You’re right. You’re right. It always looks good from the outside. But

Tobias Carlisle
I don’t think it looks that good from the outside. No, you’re right on that too. Yeah. The Golden the golden cage, or the gilded cage, or whatever it is.

Nathaniel E. Baker
Yeah, yeah. Yeah. I mean, we’re talking on a Friday afternoon. I wonder what’s next doing? Who knows? But yeah, all right. So but on the whole, though, you think that it sounds like you’re you think this is cut, there are opportunities, pockets of value, that can are worth buying at this time? Is that a fair statement?

Tobias Carlisle
I think that value is evergreen, that the idea of value that you’re buying something for less than it’s worth, that that idea is evergreen, we go through these speculative periods in the markets. And, you know, they’re all famous burns like the.com, very famous speculative peak, the last the 2000 70,009, one was a little bit more broad based, it’s like a private equity and real estate, kind of speculative boom, when they happen, value tends to not do as well from on a relative basis, and probably also on an absolute basis. Because that value, investors tend to be a little bit more conservative, don’t participate as much in the upside, they’re probably more likely. So as before it gets before it gets too high. And so that value will, as a strategy, I think, is evergreen, but it does tend to have these long periods of underperformance, we’ve gone through the longest period of underperformance and 200 years of data, and it started sort of 2010. And it seems to have ended in somewhere between September 2021 And September 2020, sorry, September 2020, and September 2021. So it’s not that it’s not that value. through that period. The opportunities weren’t there. It’s just that the opportunities weren’t getting bid. And so it’s tough when you know, I’ve also got one, I’ve got a fun, I’m trying to raise money on the other side to get to show performance to raise money to deploy money. But it’s a double edged sword. As soon as the performance comes along. The opportunity’s got away. So that’s the that’s the challenge. That’s why we’re in a good spot now where there is a little bit of performance, but it’s so early on, there are also lots and lots of opportunities around and they’re going to be in stuff that’s not particularly sexy to most investors, because I’m definitionally, I’m interested in stuff that you don’t have to pay very much for and so those opportunities will look like their money was as they’re not going to look like they’re the best. They can be an old industries, smokestack industries, often they’re capital intensive. But you know, they offer a lot of protection on the balance sheet. What a downside protection. If we get a genuine shakeout like we have had in the past that 2007 2009 2000 2000 to start shakeout people will start worrying about the downside again. Now, that’s the aim of this game is not so much to perform in the good times, it’s to survive the bad times. And so I’m always preparing to survive for the bad times. And I think they’re probably here. So we this is a challenging 12 months, probably coming up, but a good one for value investors, because you’re gonna find a lot of opportunities. And I would, I would be looking at value as a as a good place to put some of my money.

Nathaniel E. Baker
Very interesting. We’re definitely going to get a shake up. By the way, the only question is, when I mean, this, there’s going to be another bear market at some point, whether it’s now or a year from now, or two or three or whatever years from

Tobias Carlisle
now, there’s always some suggestion that the Fed has conquered the business cycle. That idea gets flipped, and

Nathaniel E. Baker
they started saying that that’s when you should sell because yeah, but they

Tobias Carlisle
there’s always this belief that we’ve got the sort of technological every single advance in the market is accompanied by the sidecar. We’ve got better tools, we’ve got better data. Our policies are better the people that implemented a more rational level Those idiots in the past. The thing is that all of that technology and all of that rationality at some, at some point becomes the idiots in the past and then the brave new world is all. It’s all there again. And I think we don’t learn that lesson. It’s always humans in it, which is why, you know, there’s always another crash coming. And I think that a lot of indicia of, of a speculative excess, and then weakness in the markets. I think it’s here. So I think we’re probably in it now. But you know, it could be wrong.

Nathaniel E. Baker
Very interesting. Tobias Carlisle, thank you so much for joining the contrarian investor podcast today. It is Friday, February 25. Recording after a very eventful week. In closing, maybe you can just let our people know where they can find you. And I’ll put this in the show notes as well.

Tobias Carlisle
Yeah, my, my, I have two funds, Zig, which is the acquirers Fund, which is US domestic mid cap, large cap, deep value, and deep, which is US domestic, small and micro. And they’re both ETS, the the firm is called acquirers funds, and have a little website where I put up it’s got a free screen on and it’s got just articles and podcasts, links and links to my books and things like that. On Twitter at greenbacks to funny spelling gr e NBA CKD. I look forward to being back on in two years so

Nathaniel E. Baker
that I know I’m gonna have the answer right now. That I’m going to have.

Tobias Carlisle
We can talk about all the mistakes.

Nathaniel E. Baker
Yeah, no mistakes are human too. Let’s not forget that. But yeah, but well argued. Yeah. So that’s great. Good stuff. Tobias. Thank you for coming on. Again. Thank you all for listening. And with that, we look forward to speaking to you again next time.

Tobias Carlisle
Thanks Nate. My pleasure.

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